OPEC+ Meeting: no silver bullet to ease the supply crisis

OPEC+ meeting on Thursday, 31 March 2022


The meeting of the OPEC+ ministers that is scheduled to be at 13:30 Vienna time, according to the analysts who understand the pulse of the participants, is not going to produce any short-term miracles to bring the prices of crude oil down.

On the contrary, they may emphasize the need of long term investments in the sector, lack of which is often blamed on the ambitious Net Zero targets.

The OPEC+ is in no hurry to fill the potential vacuum left by the absence of Russian supply in the crude oil markets either. Russia, after all, is still a member of the cartel - a highly influential member that has been instrumental in coming up with the current strategy of putting the group's interests first.

Although the group had made a decision to increase the production by 430,000 bpd, the statistics show that some member states could not deliver the required quota due to 'technical difficulties' that often come - or conveniently placed - under the umbrella of lack of investments in the sector.

The strong diplomatic relations between Russia and the two key members of the OPEC+, the UAE and Saudi Arabia,  is a catalyst that holds the latter in a cohesive position and keeping the multi-faced international pressure at bay.

The current situation in the energy markets, undoubtedly, gives the Western leaders sleepless nights: even the reduction of duty has not been passed on to customers by the oil companies citing many reasons; the inflation is going through roof; as far as the EU is concerned, even fuel rationing is on the table, that can lead to social unrest, in addition to a myriad of economic disasters.

 

 

The fact that the main consuming nations talk about releasing the SPRs, strategic petroleum reserves, reflects the sheer desperation faced by the policy makers and being at the end of the tether of diplomacy rather than taking the bull by the horns; we have been there before, but to no avail.

It also shows that the success of reviving the JCPOA, 2015 Iranian nuclear deal, is as illusive as it had been during the past few months; the relations between the West and Russia, which borders on non-existence at present, do not streamline the process either.

Despite the rising prices at the pump, the so-called demand destruction has not come about - as yet. On the contrary, the consumption has gone up, according to the latest US crude oil inventory reports; the consumers seem to have accepted the inevitable despite the obvious consequences. 

Both the API, American Petroleum Institute, and the EIA, US Energy Information Administration, meanwhile, show substantial crude oil draws: the figures for the last week were 3 million and 3.4 million barrels respectively, beating their own forecasts. 

With no sign of a substantial increase in supply, the crude oil price is going to stay above $100 for months to come, as a quick end to the Ukrainian conflict is just a pie in the sky; President Putin is in Ukraine for the long haul, punctuating the battered landscape with conflicting signals. 

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